WARRANT RIGHTS AGREEMENT
WARRANT RIGHTS AGREEMENT (the "Agreement"), dated as of March 25, 2003, by
and between AM COMMUNICATIONS, INC., a Delaware corporation ("Company"), and
CHATHAM INVESTMENT FUND I, LLC ("Chatham") and LASALLE BUSINESS CREDIT, LLC as
agent for STANDARD FEDERAL BANK NATIONAL ASSOCIATION, a national bank
association ("Lender" together, with Chatham, the "Warrantholders").
WHEREAS, Lender and Chatham have each purchased and are the beneficial
owners of certain warrants, each dated of even date herewith, under which, among
other things, Lender and Chatham are each entitled to purchase shares of Common
Stock (each a, "Warrant"); and
WHEREAS, the Company wishes to provide to Lender and Chatham the rights
described herein;
NOW, THEREFORE, in consideration of the mutual promises contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Company and the Warrantholders, intending to be
legally bound, hereby agree as follows:
1. Definitions. Unless the context otherwise requires, the terms defined in
this Section 1 shall have the meanings herein specified for all purposes of this
Agreement, applicable to both the singular and plural forms of any of the terms
herein defined.
"Agreement" shall mean this Warrant Rights Agreement, as the same may
be amended or modified from time to time.
"Board" shall mean the Board of Directors of the Company.
"Chatham" shall have the meaning assigned to it in the introductory
paragraph of this Agreement.
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency then administering the Securities Act and other federal
securities laws.
"Common Stock" shall mean (except where the context otherwise
indicates) the Common Stock, $0.10 par value, of the Company as constituted on
the date hereof, and any capital stock of the Company into which such Common
Stock may hereafter be changed.
"Company" shall have the meaning assigned to it in the introductory
paragraph of this Agreement.
"Designated Person" shall mean any natural person, at any time or from
time to time, designated therefor by the Holders of a Majority of the
Registrable Securities.
"Exercise Price" shall have the meaning assigned to it in Section 3.3
hereof.
1
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect from time to time.
"Fair Market Value" shall have the meaning assigned to it in the
Warrant.
"Holder" shall mean, individually or collectively as the context
requires, (i) the Warrantholders and (ii) any and all record owners of any then
outstanding share of Registrable Securities.
"Holders of a Majority of the Registrable Securities" shall mean the
Person or Persons who are the Holders of more than 50% of the then outstanding
shares of the Registrable Securities. For purposes of this definition only, any
Warrant outstanding at such time shall be deemed to be that number of
Registrable Securities into which the Warrant is then convertible, exchangeable
or exercisable, assuming full conversion, exchange or exercise (as applicable).
"Initiating Holder" shall have the meaning assigned to it in Section
2.2(a) hereof.
"Lender" shall have the meaning assigned to it in the introductory
paragraph hereof.
"New Term Loan" shall mean Term Loan C and Term Loan D, as such terms
are defined in that certain Loan and Security Agreement, dated as of August 14,
2002, by and among the Company, the Company's subsidiaries and LaSalle Business
Credit, LLC (f/k/a LaSalle Business Credit, Inc.), as agent for Standard Federal
Bank National Association, as amended pursuant to Amendment No. 1 thereto dated
as of March 25, 2003, as the same may be further amended, modified, supplemented
or restated from time to time.
"Offering Time" shall have the meaning assigned to it in Section
2.2(a) hereof.
"Person" shall include any natural person, corporation, trust,
association, company, partnership, joint venture and other entity and any
government, governmental agency, instrumentality or political subdivision.
"Register", "registered" and "registration" refer to a registration
effected by preparing and filing a registration statement or similar document in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement or document.
"Registrable Securities" means (i) the then outstanding shares of the
Restricted Stock, (ii) any securities issued or issuable with respect to such
Restricted Stock by way of a stock dividend or stock split or in connection with
a combination of shares, recapitalization, merger or consolidation or
reorganization, and (iii) any other security issued or issuable in exchange for,
2
or in replacement of, any shares of the Restricted Stock; provided, however,
that any securities shall only be treated as Registrable Securities for purposes
of this Agreement if and so long as they have not been (A) sold to or through a
broker or dealer or underwriter in a public distribution or a public securities
transaction, (B) registered under the Securities Act pursuant to a registration
statement filed thereunder, or (C) sold in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act under
Section 4(1) or Rule 144 thereof.
"Registration Expenses" shall mean all expenses incident to the
Company's performance of or compliance with Section 2.1 hereof, including,
without limitation, all registration, filing and National Association of
Securities Dealers, Inc. fees, all listing fees, all fees and expenses of
complying with securities or blue sky laws (including, without limitation,
reasonable fees and disbursements of counsel for the underwriters in connection
with blue sky qualifications of the Registrable Securities), all word
processing, duplicating and printing expenses, messenger and delivery expenses,
the fees and disbursements of counsel for the Company and of its independent
public accountants, including the expenses of "cold comfort" letters required by
or incident to such performance and compliance, any fees and disbursements of
underwriters (including, without limitation, fees and expenses of counsel to the
underwriters) customarily paid by issuers or sellers of securities and the
reasonable fees and expenses of one counsel to the selling Holders of
Registrable Securities (such counsel to be selected by Holders of a majority of
the Registrable Securities covered by such registration).
"Requesting Stockholder" shall have the meaning assigned to it in
Section 2.2(a) hereof.
"Restricted Stock" shall mean (i) any shares of Common Stock or other
securities of any type issued or issuable pursuant to the exercise of a Warrant
and (ii) any securities issued with respect to any of such shares or other
securities referred to in clause (i) upon the conversion thereof into other
securities or by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise.
"Securities Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations of the Commission thereunder, all as the same shall be in
effect from time to time.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities, and, except as
included in Registration Expenses, all fees and disbursements of counsel for any
Holder.
"Warrant" shall have the meaning assigned to it in the first "Whereas"
clause of this Agreement.
"Warrantholders" shall have the meaning assigned to it in the
introductory paragraph of this Agreement.
3
2. Registration Rights.
2.1 Piggy-back Registration Rights.
(a) Right to Include Registrable Securities. If at any time or
from time to time after the date of this Agreement, the Company proposes to
register its Common Stock for its own account for sale to the public (other than
a registration relating solely to employee benefit plans, a registration
relating solely to a transaction covered by Rule 145 of the Securities Act, or a
registration on any other registration form which does not permit secondary
sales or does not include substantially the same information as would be
required to be included in a registration statement covering a sale of the
Registrable Securities), the Company will:
(i) promptly give to each Holder written notice thereof; and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance with applicable securities
laws), and in any underwriting involved therein (if so requested pursuant to
Section 2.1(b) below), all the Registrable Securities specified in a written
request or requests, made within twenty (20) days after receipt of such written
notice from the Company, by any Holder, except as set forth in Section 2.1(c)
below.
(b) Underwriting. If any proposed registration for which the
Company gives a Holder notice pursuant to Section 2.1(a) hereof is for a
registered public offering involving an underwriting, the Company shall so
advise the Holders as a part of the written notice given pursuant to Section
2.1(a). If requested by any Holder, the Company will arrange for the
underwriter(s) of such offering to include all the Registrable Securities to be
offered and sold by such Holder among the securities of the Company to be
distributed by such underwriter(s), except as set forth in Section 2.1(c) below.
All Holders who submit such a request shall, upon the request of the Company,
appoint a single representative to act on behalf of such Holders. The Holders of
Registrable Securities to be distributed by such underwriter(s), or their
representative, shall be parties to the underwriting agreement between the
Company and such underwriter(s). Any such Holder of Registrable Securities, or
its representative, shall not be required to make any representations or
warranties to, or agreements with, the Company or the underwriter(s) other than
representations, warranties or agreements regarding such Holder, such Holder's
Registrable Securities and such Holder's intended method of distribution or any
other representation, warranty or agreement required by law.
(c) Priority. Notwithstanding anything to the contrary
contained herein, (i) the Company shall have the right to withdraw any
registration statement filed under Section 2.1(a) hereof, and (ii) if the
managing underwriter of any underwritten offering covered by Section 2.1(b)
hereof shall inform the Company in writing of its good faith belief that the
number of Registrable Securities requested to be included in such registration
would adversely affect such offering, then the Company shall be required to
include in the offering only that number of such Registrable Securities as the
managing underwriter believes will not jeopardize the success of the offering,
in each case without thereby incurring any liability to any Holder of
Registrable Securities. The Company shall advise all Holders of Registrable
4
Securities requested to be included in any registration pursuant to Section
2.1(a) hereof of a withdrawal of the registration statement or the imposition of
any such restrictions by the managing underwriter, and the number of shares of
securities that may be included in the registration and underwriting shall be
allocated first to all securities proposed by the Company to be sold for its own
account, and second among all such Holders and the holders of all other
securities of the Company requested to be included in such registration pro rata
among such Holders and other holders, in proportion to the respective number of
shares held by such Holders and other holders at the time of filing the
registration statement.
2.2 Demand Registration Rights.
(a) Registration on Request. At any time after the date hereof,
if the Company completes a Public Offering in which the Company receives
proceeds of at least $5 million, then from and after the date on which such
offering is completed ("Offering Time"), upon the written request of a Holder
(the "Initiating Holder"), requesting that the Company effect the registration
under the Securities Act of all or part of such Initiating Holder's Registrable
Securities in a firm commitment underwritten offering with an expected offering
price of at least $5 million, or such lesser amount if all the remaining
Registrable Securities held by the Initiating Holder are to be registered or, if
the Company meets the eligibility requirements, in a shelf registration under
the Securities Act on Form S-3, of all or part of such Initiating Holder's
Registrable Securities and specifying the intended method of disposition
thereof, the Company will promptly give written notice of such requested
registration to all holders of Registrable Securities, and thereupon the Company
will use its best efforts to effect the registration under the Securities Act of
the following securities:
(i) the Registrable Securities which the Company has been so
requested to register by the Initiating Holder for disposition in accordance
with the intended method of disposition stated in such request;
(ii) all other Registrable Securities the holders (a
"Requesting Stockholder") of which shall have made a written request to the
Company for registration thereof within twenty (20) days after the giving of
such written notice by the Company (which request shall specify the intended
method of disposition of such Registrable Securities); and
(iii) all shares of the Common Stock which the Company may
elect to register in connection with the registration of Registrable Securities
pursuant to this Section 2.2(a), whether for its own account or for the account
of a holder of such shares of the Common Stock,
all to the extent requisite to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Securities and the
additional shares of Common Stock, if any, to be so registered; provided that
(i) a Holder and any other holders of Registrable Securities as a class shall be
entitled to not more than one (1) registration upon request pursuant to this
Section 2.2(a), and (ii) a Holder shall not demand, as an Initiating Holder, a
registration under this Section 2.2(a) within 90 days of such Holder's receipt
of the Company's notice provided pursuant to Section 2.1(a) above (which shall
5
in no way otherwise affect such Holder's rights to participate as a Requesting
Stockholder under this Section 2.2(a)).
(b) Registration Procedures. Registrations under this Section 2.2
shall be on such appropriate registration form of the Commission (i) as shall be
selected by the Company and (ii) as shall permit the disposition of such
Registrable Securities in accordance with the intended method or methods of
disposition specified in the related request for such registration. The Company
agrees to include in any such registration statement all information which
holders of Registrable Securities being registered shall reasonably request.
(c) Effectiveness of Registration. A registration requested
pursuant to this Section 2.2 shall not be deemed to have been effected (i)
unless a registration statement with respect thereto has been declared effective
by the Commission; provided that a registration which does not become effective
after the Company has filed a registration statement with respect thereto solely
by reason of the refusal to proceed by the Initiating Holder or any Requesting
Stockholder (other than a refusal to proceed based upon the advice of counsel
relating to a matter with respect to the Company) shall be deemed to have been
effected by the Company at the request of the Initiating Holder or Requesting
Stockholder, as the case may be, unless the Initiating Holder or Requesting
Stockholder, as the case may be, shall have elected to pay all Registration
Expenses incurred in connection with such registration, (ii) if, within one
hundred twenty (120) days after it has become effective, such registration is
permanently interfered with and not subsequently lifted, abeyed or resolved by
any stop order, injunction or other order or requirement of the Commission or
other governmental agency or court for any reason, other than by reason of some
act or omission by the Initiating Holder or a Requesting Stockholder, as the
case may be, or (iii) the standard conditions to closing specified in the
purchase agreement or underwriting agreement entered into in connection with
such registration are not satisfied, other than by reason of some act or
omission by the Initiating Holder or Requesting Stockholder, as the case may be.
(d) Priority. (i) If a requested registration pursuant to this
Section 2.2 involves an underwritten offering, the underwriter or underwriters
thereof shall be selected by the Holders of at least a majority (by a number of
shares) of the Registrable Securities as to which registration has been
requested and shall be reasonably acceptable to the Company.
(ii) If a requested registration pursuant to this Section
2.2 involves an underwritten offering, and the managing underwriter shall advise
the Company (with a copy of any such notice being delivered by the Company to
each Holder of Registrable Securities requesting registration and each other
holder of Common Shares to be included in such registration statement) that, in
its opinion, the number of securities requested to be included in such
registration (including securities proposed to be sold for the account of the
Company or any holder of Common Shares (other than a Holder of Registrable
Securities)) exceeds the number which can be sold in such offering within a
price range acceptable to the Initiating Holder, the Company will include in
such registration, to the extent of the number which the Company is so advised
can be sold in such offering, (i) first, Registrable Securities requested for
registration by the Initiating Holder pursuant to this Section 2.2, and (ii)
second among the Company, all Requesting Stockholders and the holders of all
other securities of the Company requested to be included in such registration
pro rata among the Company, such Requesting Stockholders and other holders, in
6
proportion to the respective number of shares sought to registered by the
Company for its own account and held by such Requesting Stockholders and other
holders at the time of filing the registration statement.
2.3 Expenses of Registration. All Registration Expenses incurred in
connection with any registration effected pursuant to this Section 2 hereof
shall be borne by the Company. Each Holder shall bear all Selling Expenses
incurred with respect to any Registrable Securities owned by such Holder.
2.4 Registration Procedures. In the case of each registration effected
by the Company pursuant to this Section 2, the Company will keep each Holder of
Registrable Securities covered thereby advised in writing as to the initiation
of such registration and as to the completion thereof. At its expense the
Company will:
(a) Use its best efforts to keep such registration effective for
a period of one hundred twenty (120) days or until the Holder(s) of the
Registrable Securities covered thereby have completed the distribution described
in the registration statement relating thereto, whichever first occurs;
(b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement;
(c) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or blue sky
laws of such jurisdictions as shall be reasonably requested by the Holders
thereof, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such jurisdiction;
(d) Furnish to each seller of Registrable Securities covered by
such registration statement such number of conformed copies of such registration
statement and of each amendment and supplement thereto (in each case including
all exhibits), and such number of prospectuses and other documents incident
thereto, as such seller of Registrable Securities from time to time may
reasonably request;
(e) Prepare and file promptly with the Commission, and promptly
notify such Holders of the filing of, such amendments or supplements to such
registration statement or prospectus as may be necessary to correct any
statements or omissions if, at the time when a prospectus relating to such
securities is required to be delivered under the Securities Act, any event has
occurred as the result of which any such prospectus or any other prospectus as
then in effect would include an untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading; and
(f) At the request of any Holder of Registrable Securities
covered by any such registration statement which involves an underwritten public
offering, furnish to such Holder at the closing provided for in the underwriting
7
agreement, (i) an opinion dated such date of the counsel representing the
Company for the purposes of such registration, addressed to the underwriters and
to the Holder or Holders making such request, covering such matters as are
customarily the subject of opinions of issuer's counsel provided to underwriters
in underwritten public offerings, and (ii) letters dated each of the effective
date of the registration statement and such closing date from the Company's
independent certified public accountants dealing with such matters as the
underwriters may reasonably request.
2.5 Preparation; Reasonable Investigation. In connection with
the preparation and filing of each registration statement under the Securities
Act pursuant to this Section 2, the Company will give the Holders of Registrable
Securities covered by such registration statement, their underwriters, if any,
and their respective counsel and accountants the opportunity to participate in
the preparation of such registration statement, each prospectus included therein
or filed with the Commission, and each amendment thereof or supplement thereto,
and give each of them such access to its books and records, and such
opportunities to discuss the business of the Company with its officers and the
independent public accountants who have certified the Company's financial
statements, as shall be necessary, in the opinion of such Holders' and such
underwriters' respective counsel, to conduct a reasonable investigation within
the meaning of the Securities Act.
2.6 Termination of Registration Rights. Notwithstanding anything to
the contrary set forth herein, the registration and other rights granted to the
Holders pursuant to this Agreement shall terminate as to each Holder at such
time as all Registrable Securities held by such Holder are eligible for sale
(without compliance with the registration requirements of the Securities Act)
pursuant to paragraph (k) of Rule 144 issued under the Securities Act.
2.7 Indemnification.
(a) By the Company. In the event of the registration of any
Registrable Securities under the Securities Act pursuant to this Section 2, the
Company will indemnify each seller of Registrable Securities thereunder and each
other person, if any, who controls such seller within the meaning of the
Securities Act, against any claims, losses, damages or liabilities to which they
may become subject under the Securities Act or under applicable state securities
laws or otherwise, insofar as such claims, losses, damages or liabilities arise
out of or are based upon any untrue statement (or alleged untrue statement) of a
material fact contained in any registration statement under which such
Registrable Securities were registered under the Securities Act pursuant to this
Agreement, prospectus (including any preliminary prospectus) or any amendments
or supplements thereto contained in any such registration statement, or arise
out of or are based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and will reimburse each such seller and each such controlling
person, for any legal and any other expenses reasonably incurred in connection
with investigating, preparing or defending any such claim, loss, damage,
liability or action; provided that the Company will not be liable in any such
case if and to the extent that any such claim, loss, damage, expense, or
liability arises out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission (i) made in conformity with
information furnished by any such seller or any such controlling person in
writing specifically for use in such registration statement or prospectus, or
8
(ii) contained in a preliminary prospectus and subsequently corrected in a final
or amended prospectus, copies of which were delivered to such seller or
controlling person on a timely basis; and provided, further, that the indemnity
agreement contained herein shall not apply to amounts paid in settlement of any
such claim, loss, damage, liability or action if such settlement is effected
without the consent of the Company, which consent shall not be unreasonably
withheld.
(b) By the Holders. Each Holder of Registrable Securities
included in a registration statement filed hereunder will indemnify and hold
harmless the Company, each of the Company's directors and officers, each person
who controls the Company within the meaning of the Securities Act, each other
Holder of Registrable Securities included in such registration statement, and
each person controlling any such other Holder, against all claims, losses,
damages and liabilities, (or actions in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any such registration statement or prospectus (including any
preliminary prospectus), or any omission (or alleged omission) to state therein
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading and will reimburse the Company, such Holders of Registrable
Securities, and such directors, officers, or control persons for any legal or
any other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, in each case to the
extent, but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement or prospectus in reliance upon and in conformity with written
information furnished to the Company by or on behalf of such Holder expressly
for use therein; provided, however, that the indemnity agreement contained
herein shall not apply to amounts paid in settlement of any such claim, loss,
damage, liability or action if such settlement is effected without the consent
of the Holder, which consent shall not be unreasonably withheld; and provided,
further, that the obligations of any Holder hereunder shall be limited to an
amount equal to the greater of (i) the gross sale proceeds received by such
Holder for the Registrable Securities sold as contemplated herein, or (ii) the
proportion of any such loss, claim, damage, liability or expense which is equal
to the proportion that the public offering price of the shares sold by the
Holder under such registration statement bears to the total public offering
price of all securities sold thereunder.
(c) Notice. Each party entitled to indemnification under this
Section 2.7 (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom; provided, however, that (i)
counsel for the Indemnifying Party, who shall conduct the defense of such claim
or litigation, shall be approved by the Indemnified Party (whose approval shall
not be unreasonably withheld), and the Indemnified Party may participate in such
defense at such party's expense; (ii) the failure of any Indemnified Party to
give notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this Agreement, except to the extent that the Indemnifying
Party's rights are materially prejudiced thereby; and (iii) if the defendants in
any such action include both the Indemnified Party and the Indemnifying Party
and the Indemnified Party shall have reasonably concluded that there may be
legal defenses available to it and/or other Indemnified Parties which are
9
different from or additional to those available to the Indemnifying Party, the
Indemnified Party shall have the right to select separate counsel (in which case
the Indemnifying Party shall not have the right to direct the defense of such
action on behalf of the Indemnified Party). No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect of such claim or litigation.
(d) Contribution. If the indemnification provided for in this
Section 2.7 shall for any reason be held by a court to be unavailable to an
Indemnified Party under paragraph (a) or (b) hereof in respect of any loss,
claim, damage or liability, or any action in respect thereof, then, in lieu of
the amount paid or payable under paragraph (a) or (b) hereof, the Indemnified
Party and the Indemnifying Party under paragraph (a) or (b) hereof shall
contribute to the aggregate losses, claims, damages and liabilities (including
legal or other expenses reasonably incurred in connection with investigating the
same), (i) in such proportion as is appropriate to reflect the relative fault of
the Company and the prospective sellers of Registrable Securities covered by the
registration statement which resulted in such loss, claim, damage or liability,
or action in respect thereof, with respect to the statements or omissions which
resulted in such loss, claim, damage or liability, or action in respect thereof,
as well as any other relevant equitable considerations, or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as shall be appropriate to reflect the relative benefits
received by the Company and such prospective sellers from the offering of the
securities covered by such registration statement. No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation. Such prospective sellers'
obligations to contribute as provided in this Section 2.7(d) are several in
proportion to the relative value of their respective Registrable Securities
covered by such registration statement and not joint. In addition, no Person
shall be obligated to contribute hereunder any amounts in payment for any
settlement of any action or claim effected without such Person's consent, which
consent shall not be unreasonably withheld.
2.8 Information to be Provided by Holder. The Holders of Registrable
Securities to be included in any registration effected hereunder shall furnish
to the Company such information regarding such Holders and the distribution
proposed by such Holders as the Company may reasonably request in writing or as
may otherwise be required by applicable laws. The obligations of a Holder under
this Section 2.8 shall be a condition precedent to such Holder's participation
in any registration effected pursuant to this Agreement.
2.9 Transfer of Registration Rights. The rights to cause the Company
to register securities granted the parties hereto under Section 2 of this
Agreement may be assigned to a transferee or assignee of the underlying
Registrable Securities, provided that the Company is given written notice at the
time of or within a reasonable time after said transfer, stating the name and
address of said transferee or assignee and identifying the securities with
respect to which such registration rights are being assigned and provided
further that the transferee or assignee of such rights expressly assumes the
obligations herein provided.
10
2.10 "Market Stand-off" Agreement. (a) Any Holder, if requested by the
Company and an underwriter of Common Stock (or other securities) of the Company,
shall, upon written notice from the Company, not sell or otherwise transfer or
dispose of any Common Stock (or other securities) of the Company held by such
party, and not being sold in a registration described in this Section 2, for a
period of up to one hundred eighty (180) days following the effective date of a
registration statement of the Company filed under the Securities Act; provided
that all control persons, officers and directors of the Company enter into
restrictions that are at least as onerous. The Company may impose stop-transfer
instructions with respect to the shares (or securities) subject to the foregoing
restriction until the end of said period.
(b) In addition, each Holder of Registrable Securities agrees by
acquisition of such Registrable Securities not to sell, make any short sale of,
loan, grant any option for the purchase of, effect any public sale or
distribution of or otherwise dispose of any equity securities of the Company,
during the ten days prior to and the 90 days (or such longer period as required
by the underwriter) after the effective date of any underwritten registration
pursuant to Sections 2.1 or 2.2 has become effective, except as part of such
underwritten registration, whether or not such Holder participates in such
registration, and except as otherwise permitted by the managing underwriter of
such underwriting (if any). Each Holder of Registrable Securities agrees that
the Company may instruct its transfer agent to place stop transfer notations in
its records to enforce this Section 2.10(b).
(c) The Company agrees not to sell, make any short sale of, loan,
grant any option for the purchase of, effect any public sale or distribution of
or otherwise dispose of its equity securities or securities convertible into or
exchangeable or exercisable for any of such securities during the ten days prior
to and the 90 days after the effective date of any registration pursuant to
Section 2.1 or 2.2 has become effective, except (i) as part of such
registration, (ii) pursuant to registrations on Form S-4 or S-8 or any successor
or similar forms thereto or (iii) as otherwise permitted by the managing
underwriter of such offering (if any).
(d) No Person may participate in any underwritten offering
hereunder unless such Person (i) agrees to sell such Person's securities on the
basis provided in any underwriting arrangements approved, subject to the terms
and conditions hereof, by the Person or a majority of the Persons entitled to
approve such arrangements and (ii) completes and executes all agreements,
questionnaires, indemnities and other documents (other than powers of attorney)
required under the terms of such underwriting arrangements.
2.11 Reporting Requirements Under the Exchange Act. So long as any
Registrable Securities are outstanding and the Company is otherwise legally
required to do so, the Company agrees to register, or maintain registration of,
its Common Stock under Section 12 of the Exchange Act and agrees to use its best
efforts to keep effective such registration and to file timely such information,
documents and reports as the Commission may require or prescribe under Section
13 of the Exchange Act. The Company acknowledges and agrees that the purpose of
the requirements contained in this Section 2.11 is to enable a Holder to comply
with the current public information requirement contained in paragraph (c) of
Rule 144 under the Securities Act should such Holder ever wish to dispose of any
shares of the Registrable Securities in reliance upon Rule 144 (or any other
similar exemptive provision).
11
3. Representations, Warranties and Agreements.
3.1 The Company represents and warrants to each Holder that:
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and is qualified or
licensed to do business in all other states and jurisdictions in which the
failure to be so qualified or licensed could reasonable by expected to have a
material adverse effect on the Company.
(b) The Company has the right and corporate power and is duly
authorized and empowered by all necessary organizational actions to enter into,
execute, deliver and perform this Agreement and the Warrants, and the officers
of the Company executing and delivering this Agreement and the Warrants are duly
authorized and empowered to do so. This Agreement and the Warrants have been
duly and validly executed, issued and delivered and constitute the legal, valid
and binding obligations of the Company, enforceable in accordance with their
respective terms.
(c) The execution, delivery and performance of this Agreement and
the Warrants shall not, by the lapse of time, the giving of notice or otherwise,
constitute a violation of any of provisions of the Company's Certificate of
Incorporation or By-laws or in any agreement, instrument or document to which
the Company is a party or by which it is, or may be, bound or constitute a
violation of any judgment, decree, law, or governmental, judicial or
administrative order, rule or regulation which could reasonable be expected to
have a material adverse effect on the Company.
(d) Schedule A to this Agreement sets forth an accurate and
complete statement of the Company's authorized and issued capital stock and any
authorized and issued convertible securities pursuant to which the Company is
bound to issue any shares of its capital stock, including without limitation all
outstanding warrants, options or other convertible securities. The Company has
not authorized for issuance any other shares of capital stock or convertible
securities other than those disclosed in Schedule A.
(e) The shares of Common Stock issuable upon exercise of the
Warrants have been duly and validly authorized and reserved for issuance and,
when issued in accordance with the terms of the Warrants and Warrant Rights
Agreement, will constitute fully paid and nonassessable shares of Common Stock.
3.2 Authorization of Securities. The Company shall hereafter take all
actions, and do all things, necessary or desirable to assure that any securities
issuable upon exercise of each Warrant, which are not shares of Common Stock of
the type referred to in clause (e) of Section 3.1(a), have been duly and validly
authorized and reserved for issuance and, when issued in accordance with the
terms of each Warrant and the Warrant Rights Agreement, will constitute fully
paid and non-assessable shares.
3.3 Par Value. If at any time, pursuant to the terms and provisions of
a Warrant, the "Exercise Price" (as such term is defined the Warrant) is less
than the then current par value of the Common Stock, the Company shall, as
12
promptly as practicable, amend its Certificate of Incorporation to change the
par value of the Common Stock to an amount which would be lower than the
Exercise Price.
3.4 Board of Directors. The Company agrees that for so long as the
Warrants or any Conversion Shares which constitute Registrable Securities remain
outstanding, but then only until such time as a Designated Person is elected to
the Board of Directors of the Company, as hereinafter provided for, it shall
give to each Holder notice of each meeting of the Board of Directors of the
Company (at the same time such notice is given to the members of that Board of
Directors, with such notice being of the same type and kind so given) and of
each action sought to be taken by such board without meeting. The Designated
Person may attend each such meeting in a non-voting advisory capacity and to
demand of, and then receive from, the Company, copies of all notices, minutes,
consents and other materials that the Company provides to its directors. The
Company agrees that for so long as the Warrants or any Conversion Shares which
constitute Registrable Securities remain outstanding, but then only if the New
Term Loans have been paid in full, the Holders shall have the right to nominate
the Designated Person for election to, and upon such nomination, have the
Designated Person elected to, the Board of Directors of the Company. The Holders
shall not be entitled to vote with respect to, nor shall they be deemed the
holder of Common Stock or any other securities of the Company which may at any
time be issuable on the exercise of the Warrants, nor shall anything contained
herein be construed to confer upon the holders of the Warrants, as such, the
rights of a stockholder of the Company or the right to vote for the election of
directors (except as aforesaid) until the Warrant held by such holder is
exercised.
3.5 Existing Convertible Securities. The Company hereby further
represents and warrants to each Holder that each of the securities (the
"Convertible Securities") listed on Schedule A attached hereto which is
convertible into, or exchangeable or exercisable for, shares of the Common Stock
was issued by the Company for a consideration payable by the recipient of such
Convertible Security equal to or greater than the Fair Market Value of such
Convertible Security on its respective date of issuance.
3.6 Notice of Warrant Exercise. The Company agrees to provide Chatham
with prompt notice of the exercise of a Warrant, either in whole or in part, by
Lender if Chatham is listed on the Company's records as a holder of an
outstanding Warrant at the time the Company receives notice from Lender of such
exercise. The Company agrees to provide Lender with prompt notice of the
exercise of a Warrant, either in whole or in part, by Chatham if Lender is
listed on the Company's records as a holder of an outstanding Warrant at the
time the Company receives notice from Chatham of such exercise. Chatham and
Lender agree to give the other prior notice of such Person's exercise of a
Warrant, either in whole or in part.
4. Miscellaneous.
4.1 Waivers and Amendments. With the written consent of the Holders of
a Majority of the Registrable Securities, the rights and obligations of the
Company and the rights and obligations of the Holders under this Agreement may
be waived (either generally or in a particular instance, either retroactively or
prospectively, and either for a specified period of time or indefinitely), and
with the same consent the Company, when authorized by resolution of its Board,
13
may enter into a supplementary agreement for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement or of any supplemental agreement or modifying in any manner the
rights and obligations hereunder of the Holders and the Company; provided,
however, that no such waiver or supplemental agreement shall reduce the
aforesaid proportion of the Holders which are required to consent to any waiver
or supplemental agreement, without the consent of the Holders of all of the then
outstanding shares of the Registrable Securities. Upon the effectuation of each
such waiver, consent or agreement of amendment or modification, the Company
shall promptly give written notice thereof to the Holders who have not
previously consented thereto in writing. Neither this Agreement, nor any
provision hereof, may be amended, waived, discharged or terminated orally or by
course of dealing, but only by a statement in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought, except to the extent provided in this Section 4.1. Specifically, but
without limiting the generality of the foregoing, the failure of any Holder at
any time or times to require performance of any provision hereof by the Company
shall in no manner affect the right of such Holder at a later time to enforce
the same. No waiver by any party of the breach of any term or provision
contained in this Agreement, in any one or more instances, shall be deemed to
be, or construed as, a further or continuing waiver of any such breach, or a
waiver of the breach of any other term or covenant contained in this Agreement.
4.2 Effect of Waiver or Amendment. Each Holder acknowledges that, by
operation of Section 4.1 hereof, the Holders of a Majority of the Registrable
Securities will, subject to the limitations contained in such Section 4.1, have
the right and power to diminish or eliminate certain rights of Holders under
this Agreement.
4.3 Rights of Holders Inter Se. Each Holder shall have the absolute
right to exercise or refrain from exercising any right or rights which such
Holder may have by reason of this Agreement or any share of Registrable
Securities, including, without limitation, the right to consent to the waiver of
any obligation of the Company under this Agreement and to enter into an
agreement with the Company for the purpose of modifying this Agreement or any
agreement effecting any such modification, and such Holder shall not incur any
liability to any other Holder with respect to exercising or refraining from
exercising any such right or rights.
4.4 Notices. All notices, requests, consents and other communications
required or permitted hereunder shall be in writing and shall be personally
delivered, or mailed first class, postage prepaid, registered or certified mail,
(a) If to any Holder, addressed to such Holder at its address
shown on the records of the Company, or such other address as such Holder may
specify by written notice to the Company, or
(b) If to the Company, addressed to its principal executive
offices or such other address as the Company may specify by written notice to
the Holders,
and each such notice, request, consent and other communication shall for all
purposes of the Agreement be treated as being effective or having been given
when delivered, if delivered personally, or, if sent by mail, at the earlier of
its actual receipt or three (3) days after the same has been deposited in a
14
regularly maintained receptacle for the deposit of United States mail,
addressed and postage prepaid as aforesaid.
4.5 Severability. Should any one or more of the provisions of this
Agreement or of any agreement entered into pursuant to this Agreement be
determined to be illegal or unenforceable, all other provisions of this
Agreement and of each other agreement entered into pursuant to this Agreement,
shall be given effect separately from the provision or provisions determined to
be illegal or unenforceable and shall not be affected thereby.
4.6 Parties in Interest. All the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the respective successors and assigns of the parties hereto.
4.7 Headings. The headings of the Sections and paragraphs of this
Agreement have been inserted for convenience of reference only and do not
constitute a part of this Agreement.
4.8 Choice of Law. It is the intention of the parties that the
internal substantive laws, and not the laws of conflicts, of the Commonwealth of
Pennsylvania should govern the enforceability and validity of this Agreement,
the construction of its terms and the interpretation of the rights and duties of
the parties hereto.
4.9 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, with the
same effect as if all parties had signed the same document. All such
counterparts shall be deemed an original, shall be construed together and shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have duly authorized and executed this
Agreement, intending it to be effective as of the date first above written.
AM COMMUNICATIONS, INC.
By: /s/ H. Xxxxxxx Xxxxxx, III
-----------------------------------
Name: H. Xxxxxxx Xxxxxx, III
Title: Corporate Controller
WARRANTHOLDERS:
LASALLE BUSINESS CREDIT, LLC, as agent for
STANDARD FEDERAL BANK NATIONAL ASSOCIATION
By: /s/ Xxxxxxx X. Xxxx, Xx.
-----------------------------------
Name: Xxxxxxx X. Xxxx, Xx.
Title: Vice President
CHATHAM INVESTMENT FUND I, LLC
By: CHATHAM MANAGMENT, LLC
Its: Manager
By: /s/ Xxxxxxx X. Xxxx
-----------------------------------
Name: Xxxxxxx X. Xxxx
Title: Managing Partner
SCHEDULE A
AUTHORIZED AND ISSUED CAPITAL STOCK
AND CONVERTIBLE SECURITIES
1. The Company has 150 million shares of Common Stock, par value $0.10
per share, authorized, of which 63,422,350 shares are presently
outstanding.
2. The Company has 1,000,000 shares of "blank check" preferred stock, par
value $0.10 per share, authorized, of which 25,825 shares have been
designated by the Board of Directors of the Company to be "Xxxxx
Xxxxxxx Preferred Stock" and 74,074 shares have been designated by the
Board of Directors of the Company to be "Series A Preferred Stock." No
shares of the Xxxxx Xxxxxxx Preferred Stock are presently outstanding.
There are 51,851 shares of the Series A Preferred Stock presently
outstanding. The Company has reserved 5,185,100 shares of its Common
Stock, plus such indeterminate additional shares thereof as may be
necessary in the event of an adjustment or adjustments of the number
of shares of the Common Stock issuable upon a conversion of the series
A Preferred Stock, for issuance upon a conversion of the Series A
Preferred Stock.
3. The Company has entered into a Stock Purchase Rights Agreement with
Xxxxx X. Xxxxxx, dated as of December 29, 2001, pursuant to which,
upon the occurrence of certain triggering events, Xx. Xxxxxx has the
right to purchase up to 6 million shares of the Company's Common Stock
at a purchase price of $0.38 per share. None of the triggering events
specified in such Stock Purchase Rights Agreement has occurred prior
to the date hereof. However, the Company has reserve 6 million shares
of its Common Stock for issuance to Xx. Xxxxxx pursuant to the terms
and provisions of the Stock Purchase Rights Agreement.
4. In addition to the foregoing and the Warrants, the following
convertible securities issued by the Company are presently
outstanding:
Description of Presently No. of Common Stock
Outstanding Convertible Security Shares Reserved for Issuance
-------------------------------- ----------------------------
Common Stock Purchase Warrants 3,547,627, plus such
indeterminate additional shares
thereof as may be necessary in
the event of an adjustment or
adjustments of the number of
shares of the Common Stock
issuable pursuant to such warrants
Description of Presently No. of Common Stock
Outstanding Convertible Security Shares Reserved for Issuance
-------------------------------- ----------------------------
Outstanding Stock Options 23,559,061 (includes 950,000
options to be required to be
issued to Xxxxxx Xxxxxxxx under
the terms of his Employment
Agreement with the Company and
1,000,000 options to be issued to
Xx. Xxxxxx under the terms of his
Employment Agreement with the
Company)
5. AM has contractual obligations to issue the following securities:
Description of No. of Common Stock
Security Shares Reserved for Issuance
-------------- ----------------------------
Xxxxxxx Convertible Subordinated number of shares of the
Debenture(s) (to be issued on or Common Stock for which
before March 31, 2003) such Debenture(s) are
initially exercisable
(approximately 4,705,882
based on current AM
stock price)
Second Chatham Warrant None at present
Second Lender Warrant None at present
